Like a bad zombie movie where no one really dies, California’s “split roll property tax” is back. The last time it had a heartbeat was in 2015 via the so-called “Make it Fair” initiative, which was headed for the ballot in 2016. But due to some Democratic pushback, the proposition was pulled, much to the consternation of public employee unions and other leftist tax grabbers.
Now the same bunch that failed to usher in this misery-laden tax in 2015 is planning to revive it in 2020 with the claim that it would raise $11 billion a year for schools and local governments. In a nutshell, the “split roll” initiative would gut Prop 13 protections for businesses, but spare individuals the massive tax hike. Since 1978, Prop. 13 has limited property taxes on all forms of property – private and commercial – to 1 percent of assessed value, and limits increases in that value to no more than 2 percent a year, except when properties change hands.
But the proposed commercial tax bump would be a disaster for California. It would increase business costs, which would then be passed on to others, resulting in higher lease and rental prices, higher product prices, a reduction in employees and the salaries of those remaining, as well as a cutback in overall economic activity. A March 2012 study from Pepperdine University’s School of Public Policy showed that adopting such a “split-roll” property tax would result in a loss of 400,000 jobs and $72 billion in economic activity in the first five years.
For those of you who don’t live in California, it’s important to note that the state is hardly tax-starved. As San Diego tax warrior Richard Rider points out, we have the highest state income tax rate, sales tax and gas pump tax in the country, as well as the second highest corporate income tax rate of all states west of Iowa.
Now for some good news. The bill’s inept honchos can’t seem come up with the right wording. After getting the required number of signatures (almost 600,000) to appear on the 2020 ballot, the proponents yanked the first version of the bill in August because they felt its flaws would prevent it from winning at the polls. So they “fixed” the proposition and refiled it the same month. The bad news for them is that by then it required getting almost a million signatures to qualify it for the ballot. Then, a few weeks later they pulled the reworked prop – before gathering signatures this time – and revamped it again. So we are now on version 3… and counting. As reported by Citizen’s Journal, the latest amendments appear to be in response to a September 10th letter from the California Assessors’ Association that criticized many provisions of the initiative, declaring that the measure is “both ambiguous in some sections and overly narrow in other sections,” and “will create significant unintended consequences for ALL property owners, including homeowners and small business owners.”
Needless to say, regardless of all the problematic details, the teachers unions are drooling over the potential windfall. The California Teachers Association argues that the prop would establish “tax fairness” by eliminating “an unfair corporate property tax loophole.” And, hey, who would know more about tax loopholes than CTA? According to its most recent available tax filing, the union brought in a cool $200 million in 2016 and didn’t pay a penny of tax on it. As a 501(c)(5), all unions have a special tax-exempt status with the IRS, which is accorded to “Labor, Agricultural, and Horticultural Organizations.” The screaming irony here is that CTA persistently uses their taxpayer-paid, tax-free money to raise taxpayer taxes! (In California, public employee unions rake in about $800 million a year – all untaxed.)
According to Mike Antonucci, CTA is currently flush with cash, with $40 million available for advancing its political agenda, and is ready, willing, and able to spend generously on the prop. In fact, CTA is pledging to collect 150,000 signatures once the measure is ready to go.
If for whatever reason the third version flops, not to worry! Lurking around the corner is the California School Boards Association, which is pushing to get the Full and Fair Funding initiative on the 2020 ballot. As reported by EdSource’s John Fensterwald, CSBA asserts that their initiative “would increase funding for K-12, early education and community colleges by raising income taxes on corporations and individuals earning more than $1 million.” This initiative would set Californians back $15 billion. And yes, it is conceivable that both initiatives could wind up on the ballot in 2020.
In a song about outlaw Pretty Boy Floyd, Woody Guthrie wrote, “Some will rob you with a six-gun, and some with a fountain pen.” Today, tax bandits in California are preparing the hold-up at the ballot box in broad daylight. The good news is that the taxpayers can foil the heist, as Los Angeles voters did with Measure EE last June.
[Originally Published at the California Policy Center]